After an insane night at the Future of Web Apps conference - including the filming of an episode of Diggnation, which I feel is likely to make material for an entire article - I'm back in Docklands for the second day of talks.

First up is Paul Graham, web entrepreneur and the man behind Y Combinator - a seed investment group that's put weight behind sites like Reddit. Paul's set to talk about "the future of web startups".

He promises this is going to be a good talk.

Believe it or not, you already know what the future of web startups is. It's to undergo the same change that happens to technology when it becomes cheaper - initially there's some kind of device or material that's very expensive to make, then somebody works out how to make it cheaply. That makes it possible to use it in ways that were impossible before.

This pattern's been around for a long time: steam, mechanical power, clothing manufacture, agriculture. Now it's happening to startups; they've gone from scarce and expensive to cheap and common. If that pattern holds true then we'll see some remarkable things.

My first prediction's straightforward. There'll be lots of them. Starting up is hard, but having a 9-5 job is pretty hard too - and perhaps a worse kind of hard. In a startup you have more control and maybe you make more money. We now think of it as normal to work for a company, but historically that's the thinnest of veneers. Two or three lifetimes ago most people made a living through farming.

Standardisation follows mass production.

We often tell startups to release a crappy 1.0 product and then design it around the users' needs (not the users' wants). That's what we've been doing ourselves AS Y Combinator. We treat our company like a startup, we want to find out how to mass produce startups. Funding will start to become standardised - not at mass level, but at angel level.

There will also be a new attitude to acquisition, so it will be just as easy to buy as it will be to hire somebody - just more expensive. Google's leading the way here. There's always a stigma attached to acquisitions - why aren't our developers able to make this? Well, Google has by far the best programmers of any public tech company, and it's not scared. However many acquisitions Google's doing, Microsoft should be doing ten times more.

We often tell startups to release a crappy 1.0 product and then design it around the users' needs (not the users' wants). That's what we've been doing ourselves AS Y Combinator. We treat our company like a startup, we want to find out how to mass produce startups. Funding will start to become standardised - not at mass level, but at angel level.

There will also be a new attitude to acquisition, so it will be just as easy to buy as it will be to hire somebody - just more expensive. Google's leading the way here. There's always a stigma attached to acquisitions - why aren't our developers able to make this? Well, Google has by far the best programmers of any public tech company, and it's not scared. However many acquisitions Google's doing, Microsoft should be doing ten times more.

Basically if Chuck Norris can wear pink, any man can.

There'll be more risk. Crazy ideas like shopping a search engine in 1997 or turning down a billion dollar offer. Venture capitalists appreciate risk, founders don't. But the more startups there are, the more this works out.

There will be younger, nerdier founders. They will be able to start more companies in their lifetime. There starts to be another way to convince investors - instead of approaching VCs with a plan, you can start a company with seed funding and then approach the VCs with a company. This is much better suited to hackers.

Will we still need Silicon Valley? Yes. It's true that you can start a startup anywhere, but you also have to make it succeed - which is more likely to happen in a hub. The increasing cheapness of starting up might actually make it more necessary to be in a hub. The benefits are face to face meetings; visiting a friend down the street; happenstance. The question is not whether you need it, or whether it offers any advantage at all. Your competitors can take that advantage. This may be an uncomfortable idea.

But, a startup that's just a couple of people can be moved more easily. We make people move for Y Combinator, the advantage of working face to face for a few months outweighs the cost of moving. This means that seed funding can be a national business, not a local one (unlike venture capital). Is seed funding international? If it is, it'll be harder to set up new Silicon Valleys. All you'd end up with in your local one are the ones who couldn't be driven enough to move to the real Silicon Valley.

We'll also need better judges: better investors, better acquirers. What do we do when we get 10,000 seed funding applications per year? Acquirers will have to get better at picking winners - right now they're not bad, because they pick later in the game when there's more evidence. But closing the deal is tough: acquirers are assholes - they'll make you pay, even the nicest companies will make you pay.

Eventually companies may have a chief acquisition officer. It'd be great if there were people or groups who identified potential acquisitions and seal the deal. But at the moment there's nobody who gets in trouble for buying a company for $200m when they could have bought it earlier for $20m.

Colleges will also change, if people startup earlier. College is warped by the idea that you'll be judged in a job afterwards. But perhaps "after college" may change to graduation to leaving. We don't encourage people to startup in college - but some of the best founders are people who were still in school. No switch flips when you take that last exam: the need for university degrees are driven by administrative needs. This will matter less.

It will also matter less where you went to college; users care whether your software works. So elite universities will play less of a role. It's a scandal how easy it is for . The solution may not be to reform universities, you just go around them. We're used to this in technology. The greatest value of these universities is the people you meet; but as startups increase, you may see people concentrate on trying to meet other potential co-founders. Instead of trying to get good grades, they may try to learn stuff.

[This is really interesting, by the way. He's not the most charismatic speaker in the world, but hardly a sentence goes by that's not intriguing and challenging]

Increasing the number of startups means you can't sit on an idea. If somebody else has your idea - and somebody does, believe me - people will get right to work on them because it's easier. Microsoft is having a hard time discovering web apps - we are like the audience in a movie who can see something bad about to happen to the character on the screen; the monster's looming over them about to WHAP! them straight out of the door.

One person measuring performance found that people were 1/13th less productive once they'd been acquired. There's something about big companies that sucks the energy out of you. There's an enormous latent energy in the world's hackers that nobody realises is there. So...

Starting up is like the plumbing in an old house. Eventually it will be replaced by a single, big pipe. The water will still have to get from A to B but it will get there faster and with less risk of spraying out through some random leak. The force of being measured by one's performance will propagate back through the system. It's currently the ultimate measurement, but there are so many kinks in the plumbing that it gets lost.

In answer to some questions. He makes the point that not every new company is a startup: you want an exit. Not every kind of company needs to be in startup hub, it's possible for some sorts.

Does this model face competitors? Seedcamp and Y Europe are the only seeding companies he knows of in Europe, and none in Asia. But it's too early for anyone to rationally get into the seed funding business, because it takes at least five years to work out what your returns are going to be.

Is there stuff big companies can do to act more like startups? It's hard to reproduce the chance to earn huge amounts of money, but they suck so badly that there must be opportunities. Just release stuff. We're like a refugee camp for people traumatised by working for bigcorp. Big companies don't realise that hackers just like to build stuff. Big companies are excessively worried about their brand. But companies are probably judged by the best things they make, not the worst.

What convinces people to startup is seeing other people doing it: hey, that guy doesn't seem so smart - I could do that.

What makes startups work is angel funding. What makes Silicon Valley is not the VCs, it's the angels. Startups wouldn't get to the VCs without the angels. So angel investment can help you get over many humps. We need to cultivate more angels, that's why we want to open source our angel investing paperwork.